Category Archives: Economics and Politics

Warren Buffet’s BRK.A

There are few that would question Warren Buffett’s prestige in society as one of the most admired and prized investors in the World nor would they be surprised that the share price for a single BRK.A share sits around the $99,000 mark. However should you need some insight into why he is a go to for policy makers and an icon to not only investors but philanthropists, then look no further than his annual report, and his and Charlie Munger’s “Letter to the Shareholders”. If it is possible to have a “Being John Malkovich” style moment than this letter is the equivalent of peeping inside the slowly turning cogs of Warren Buffet’s mind! the letter flagrantly honest and whilst overly optimistic (as you expect an Executive’s opinion to be) is forthright, insightful and remarkably cheeky. You get to see where his bets were made and surprisingly where his bets have backfired (as sometimes his industry wagers turn against him), yet this is not what is interesting. Warren’s opinions and long-term philosophy based on developing future earnings is what is truly entrancing. In a world of arbitrage, HFT and irrational exuberance his level head and concentration on the underlying intrinsic value, not to mention his creativity (in areas such as Insurance where he utilises the “float” from premiums to leverage free capital) should be the basis (at least mentality wise) for all investors. There is something for everyone from Mum and Dad investor to the Fundamental/ Technical/ Momentum traders and Hedge Fund Managers yet at no time does it read anything other than shareholder targeted!

I think this tale says it all:

“Long ago, Sir Isaac Newton gave us three laws of motion, which were the work of genius. But Sir Isaac’s talents didn’t extend to investing: He lost a bundle in the South Sea Bubble, explaining later, ‘I can calculate the movement of the stars, but not the madness of men.’ If he had not been traumatized by this loss, Sir Isaac might well have gone on to discover the Fourth Law of Motion: For investors as a whole, returns decrease as motion increases” [1]

Note: Clicking the Berkshire Hathaway  Logo opens to the Shareholder letter.

[1] http://investing-school.com/history/52-must-read-quotes-from-legendary-investor-warren-buffett/

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The Basic Finance of Valentines!?


I could not quite avoid geeking out to “14 Ways and Economist Says I Love You”! Courtesy of http://fosslien.com/heart/. They may not be as readily accepted as a box of chocolates but I believe the comment “For what you are supplying, my Demand is Inelastic” is just as corny. All you need to do is scrape away the cobwebs on the Microeconomics books and revel in how romantic Economics truly can be!! I am sure that the Production Possibility Frontier has wooed many a lady!? And I am sure many a parent/ or group of friends have placed an embargo on Trade! I know this makes me sound nerdy but every time I read them I laugh both heartily and farcically

DECODING JAY Z VIA A SEARCH ENGINE

This marketing campaign by New York Firm, Droga5 has received countless awards this year including Clio Gold and the Outdoor Grand Prix at Cannes and after watching it is not surprising why! The advertising campaign for Bing search engine and Jay Z‘s book Decoded . I feel not much really needs to be said. Personally, the better video version can be found at the CLIO Award Winner Website in top left next to gold. But if you cannot be bothered then this YouTube clip is almost as good but with a slightly frustrating voice over. Thanks to paul for sending me this. It is such a creative campaign and would have required such groundwork, paperwork, organisation and not to mention MONEY! The results speak for themselves with an 11.5% share increase and Jay Z’s book hitting the NY Times Best Sellers list.



“PHOTOSYNTH”: OUR PHOTOS, MICROSOFT’S REALITY

In continuing with my obsession with TED: Ideas Worth Spreading and specifically the boffins of our world, I discovered this showcase presented by Blaise Aguera y Arcas.  He is part of the Microsoft team working on “Photosynth” to use photo’s that users have put on the web to create a completely navigational dreamscape. The idea itself was enough to force my floor to the jaw but the actual demo made that first reaction seem like an understatement. Watching the use of SeaDragon to map and seamlessly maneuver massive photographic data files ranging from low resolution personal shots to entire books and documents from the Library of Congress (at a whopping 300mp) again is reminiscent of a scene out of a sci-fi film such as a Minority Report and Deja Vu.

That was just the beginning as these images unfolded and mechanized to become an immerse spatial mapping of the world we live in. The full tour of the Notre Dame  based purely on compilations of personal photos and orange dots showing the exact angles where the photos were taken seemed to me, to be like a concept a light year away not a mere 2 years away!

Furthermore, the presenter skimmed over what he called the “obvious” commercial uses such as for road mapping and news publications, both which again were momentous breakthroughs. This software would drastically simplify the use of, as well as rapidly increase the uptake and commercial benefits for the media sector and its’ move online. Every aspect of these software programs is unnerving, not only in their brilliance, but personally for me, in terms of privacy issues they raise. The use of personal photos to build these dreamscapes represents a use of these photos for a purpose of which they were not originally planned and in a unsecure public domain. I know that every time we tweet, blog, Facebook etc we are essentially doing this but it still unnerves slightly. It probably niggles at me a bit more as so many people are naive and unaware that by signing up to the terms and conditions of Facebook gives the right of ownership of the property posted on these media to the company themselves.

This was merely a question that I had briefly thought about, but for me the technology itself is the thing that I am interested in. It is another TED (Technology, Entertainment and Design) talk that I can not describe adequately! Just watch it for yourself and become entranced

A final thought I had on the presentation was in relation to the entire tone and outlook. It was not arrogant but open and I felt these software advancements were set-up perfectly by Blaise Aguera y Arcas.

This is an additional video from the current talks at TED, Edinburgh by Kevin Slavin and based on the underlying Algorithms that are driving our lives. Being a commerce student I have always been particularly intrigued by Black Box Trading and use of algorithms in market trading. Everyday I read about someone who has been programming an algorithm in their attempts to profit from the market and the algorithms they write are rapidly drawn into trading platforms for substantial sums of money. This talk was even more interesting as it had a focus on social and cultural contexts on algorithms and how they are present in everyday things we would never bat and eyelid at- it is this that adds a whole new depth to the use of algorithms and explains why mathematicians and physicians are now leaving the laboratory. We see Algorithms used for programming everything from the elevators we ride in to the Music and films we watch (Netflix and iTunes).  The points Slavin raises about them being an entity to themselves (exampled by the book on Amazon that became worth $23m and the 2:45 crash) and the efforts we are going to ensure that our algorithms are the fastest (even if it is only by 3.2 microseconds and nowhere near detectable by human minds) are equally valid and mind provoking.

3D FILMS ARE MAKING THE EXPERIENCE 2D

3D movies have been around since the 1950’s and yet seem to have been revolutionized by the likes of James Cameron and had a rebirth due to the technological advancement of IMAX cinematography (of which most of the rights are owned by James Cameron himself). Whether there is something cynical behind the uptake of 3D films (such as the politics of influence) or just the obvious drive to get a new product to the market- the days of comets flying at your face, the helicopter your riding on dropping off a crevasse or tweety birds circling your head- are a distant memory as this WOW factor has become the dictated norm. This is a dilemma that Roger Ebert has been fighting against after  he received a penned letter from Walter Murch (an Academy Award winning sound and film editor, Cold Mountain, Apocalypse Now) entitled “Why 3D Doesn’t Work and Never Will. Case Closed” in January 2011. The release this weekend of the 4th installment of the “Pirates of the Caribbean: On Stranger Tides” has reignited the debate in forums due to the film failing to meet its’ Box Office expectations in 3D format. The article expressed that the recent phenomenally overwhelming trend for cinemas to move towards 3D film to maintain market share and increase sales revenue is actually undermining the very bottom line they are seeking to plump up.

HOW DOES 3D Work: The concept is remarkably simple and uses the basic principle that our eyes are spaced apart (around 5cm) and hence each see a slightly different perspective that the cerebrum collates and converges to form the depth perception in an image we see everyday. When you are watching a 3D film you are seeing 2 synchronised projected images each with a different polarisation (hence why it is blurred without glasses as it is image overlapping)[1]. The glasses are the final piece of the puzzle! Each lens has its’ own polarisation and allows only images of a certain polarisation to enter into each eye, thereby allowing your brain to translate the views and create the 3D image. An example used in the (Roger Ebert) article is to think of looking at a salt shaker on the table. We focus our two eyes on the shaker and our eyes tilt or converge to make our focal point the salt shaker. Furthermore, imagine a triangle with its’ base set from pupil to pupil and the vertex of the triangle is the salt shaker, this should give you an image that is much more understandable of convergence and focus.

(Photos by Marie Haws from source [2])

THE VERY REASON WE SEE IN 3D IS THE REASON 3D WILL FAIL: So now we know how it works! BUT how 3D films works is what Walter Murch argues is the very failure of the 3D boom. A main argument raised for why 3D films will never work is based on a Charles Bonnet and Charles Darwin classical theory, EVOLUTION. They call it the “Convergence Focus” issue, where by, 3D films call for the eyes to focus on the plane of the screen- this may be 80 feet away. As mentioned earlier for 3D to work the eyes must converge (tilt) but our eyes must converge on a wide variety of distances, perhaps 10, 60, 120 feet, depending on the illusion. THIS is inherently something we have never been asked to do before in the history of evolution! Keep the same Focal point but change convergence countless times within rapid time periods. This makes our BRAIN and eyes work overtime explaining why many experience headaches or you may look around and see others rubbing their eyes or “resting” them in the cinema [2].Along the same lines, our focus often causes issues with 3D films as we study and try to comprehend more of the screen in 3D films (I think in order to maximise the visual experience  and ensure we see every little thing that may be popping out as us). As a result the edges are inspected with much more vigour and this induces more frequent “STROBING” from the horizontal movement of the frames again effecting our Brain’s workload (much like that of a strobe light) [2]. It is important to note that the strobing effect has declined remarkably as frame rates have improved.

THE OTHER ISSUES: Moving away from boring old science the biggest issues that have inhibited the uptake of 3D films are related to user friendliness. The glasses (although they have improved and are trying to be trendy with a Wayfarer design) are not natural and still make you look like a muppet, I mean the whole idea of wearing glasses in a cinema goes against the very grain of our existence (unless you happen to be a ginger! sorry redhead friends) and equally kids will either love or hate them making it a battle for most parents to get their kids to sit still (and more importantly not disturb the other patrons!).
Comfort aside, the single biggest issue is the PRICING POLICY of 3D films. At an average price of $18.50 (in Australia) compared to the regular cinema ticket price being stationed around the already ridiculously priced $15 mark (much cheaper on the Tuesday) this can be crippling, especially for a family of 4 or more, where the difference in price added to the overly exorbitant candy prices is enough to force customers into the 2D film alternative. This seems to be the case as according to US analyst, Richard Greenfield (BTIG), “US consumers are rejecting 3D movies”. He goes on to hypothesise (or speculate) that the “Pirates of the Caribbean: On Stranger Tides opening takings would have been higher if 1/2 of the screens showed it in 2D rather than only a 1/3. The Box Office takings showed that 38% of the $90m came from non 3D, which was much lower than the average Disney films such as Shrek 4 and How to Train Your Dragon that opened at 54% and 57% respectively” [3]. In further evidence, according to Rotten Tomatoes, less than 50% opted for 3D versions a full 22% down from the last installment of Pirates of Caribbean: At World’s End. Obviously there were other attributable factors such as the 4th installment was an addition to the franchise with a new director and actors, hence lost some of its’ dedicated followers. As well it is important to note that it has still outgrossed the 5-day record of the launch of 2009’s Harry Potter and the Half Blood Prince with overall sales revenue due to the increased margins gained from 3D and IMAX as well as the massive growth markets such as Russia and China, however this doesn’t change the fact that numbers attending 3D sessions have declined when the market predicted an exponential uptake [4].

NOT ALL DIRECTORS LOVE 3D: The uptake by countless Directors and the pressure put on them by the studios who have heavily funded the investment in 3D infrastructure is a worrying prospect, especially when many storylines do not have the depth to support the format. One noticeable exception is Christopher Nolan, who has directed some of my favorite dark adaptations of The Batman series and also Memento and Inception, who has adopted a mindset towards 3D films that I utterly am behind. He says “The intimacy that the 3D parallax illusion imposes isn’t really compatible… I’ve seen work in 3D like Avatar that’s exciting. But, for me, what was most exciting about Avatar was the creation of a world, the use of visual effects, motion capture, performance capture, these kinds of things”. Furthermore he describes that despite an extremely large amount of pressure from the studios that he didn’t want to use 3D and wished to finish the Batman saga “in a consistent way with the previous films”. In addition, for Inception, he thought that the use of 3D would lose the “subjectivity, [quite] intimate associations between the audience and the perceived state of reality of the characters” [5]. He is quite astute in his observations in regards to the effect of the 3D experience on the audience’s perception of the film.

           

3D OUT OF THE LIGHT AND INTO THE DARKNESS: Christopher Nolan (who is obviously heavily interviewed over the topic with his decision not to make his films 3D) also stated  “On a technical level, it’s fascinating… but on an experiential level, I find the dimness of the image extremely alienating” [6]. Again this is a well-known fact about 3D films and one that has left customers disgruntled with the wide roll out of 3D IMAX cinemas. A typical 3D system can lose as much as a whopping 80%. The Motion Picture and Television Engineers specify a figure of 16 foot-lamberts (light measurement) for a projector with no film in. Add a 2D film reel and the light will drop to 14 foot-lamberts, BUT then add the two 3D reels that are made for each eye and you instantly 1/2 the light down to 7 foot-lamberts per eye! This is not to mention that the polarised lenses of the glasses cut the light further AGAIN! As a scale, Avatar is generally shown at 4 foot-lamberts but others, even more so when formatted to 3D after the fact can be as low as 2-3 foot-lamberts [6]. These are flaws in the 3D viewing experience that eliminate any chance the audience will be immersed in the escapism purpose of cinema. Although they are working hard with laser solutions [6] etc, as we stand, we are paying a price for inferiority in a time when old-fashioned entertainment sources are struggling to adapt to the hyperactive modern world we live in.

THE LOCAL CINEMA COULD BE THE PROBLEM:  Making matters worse is the fact that due to cost cutting measures or just inept staff the light issue could be at least improved for patrons.  In upgrading to digital projectors many Cinemas are failing to remove the 3D lens when showing a 2D reel making a 50% darker image along with a poor maintenance schedule, lack of funds for lenses, risk of damaging equipment (suffering corporate blow back) and obsolete depreciation schedule [7]. These are local issues that are affecting film quality due to 3D Digital Projectors. As an interesting note you can tell if cinemas are not removing the lenses- “If there are two beams of light coming from the projector for a 2D movie” [7].

THE 3D DILEMMA ultimately comes down to whether the 3D does what the audience wants it to do. I am all for 3D films and will no doubt go see Harry Potter and the Deathly Hallows Part 2 in 3D (and no doubt be disappointed) and will always see animation in 3D as I feel the vividness of colour and the out of this world environment the characters live in are exacerbated by 3D IMAX. However in terms of 3D film being used for all blockbusters, as is the push by certain directors and studios , I feel it should be used when the plotline can support it, it doesn’t alienate viewers and it is not used as a means to get extra dollars of the pockets of customers. The film itself should be what grips the audience and allows them to escape into the world and characters created.

As a bit of fun, I got this graph from THE WRAP showing the percentage market share decline in 3D sessions. I am aware that it is using bias data and not an accurate sample of distribution and also (as my friend Charlie always points out CORRELATION DOESN’T EQUAL CAUSATION) however I thought it was a colourful graph to put in that nicely sums up my point ha ha ha.

A good story will give you more dimensionality to cope with than anything 3D can offer [2] and I would much prefer being drawn into the story then being thrown about with whatever object may be flying through the air (I am specifically talking about THOR’s hammer in this instance)!!!!!!


REFERENCES

[1] How Do 3D Glasses Work

FEDERAL BUDGET 2011

This is from Peter Martin’s Website (A writer for Fairfax Media). It is a direct copy of his written article summarising the “austere” budget that is meant to put the Government into surplus in 2 years despite the National Disasters, Terms of Trade, workplace incentives, strong AUD.

What we Know: 2011-12 Federal  Budget

THE GIVE AND TAKE:

The give…

$772 million (over five years)
Extending Family Tax Benefit A to cover teenagers aged up to 18

$425 million (over four years)
Awarding performance bonuses to teachers

$350 million (over four years)
Allowing small businesses to instantly write-off the first $5000 of new cars cost from 2012-13

$309 million
Giving each full pensioner a free digital TV set top box

$292 million (over four years)
Taking 4000 genuine refugees from Malaysia

$281 million (over four years)
Giving each trades apprentice a $1700 bonus

$200 million (over 2.5 years)
Grants to schools to support students with disabilities

$47 million (over four years)
Enforcing tougher welfare rules for teen parents

$27 million
Giving former prisoners of war an extra $500 each fortnight

Negligible cost:

Lifting the proportion of the Low Income Tax Offset paid weekly

Requiring very long term unemployed to volunteer two days per week 11 months per year

Boosting skilled migration 20,000

…the take

$3.1 billion (over four years)
Closing chronic dental disease scheme

$1.9 billion (over four years)
Means testing private health insurance rebate

$1.1 billion (over four years)
Boosting public service efficiency dividend

$950 million (over four years)
Tightening FBT rules for employer-provided cars

$700 million (over one year)
Deferring until 2012-13 tax discounts on interest earned

$500 million (over four years)
Halving upfront discount for HECS payments

$365 million (over four years)
Axing Entrepreneurs Tax Offset

$300 million
Cutting 1000 Defence jobs

$54 million (over four years)
Tightening tax rules for charities

…and the forecasts

2.5%
GDP growth 2010-11

4.5% unemployment
By June 2012

500,000 extra jobs
By June 2013

$51 billion
Budget deficit 2010-11

$16 billion
Budget deficit 2011-12

More than $3 billion
Budget surplus 2012-13

I LOOK FORWARD TO THE ANALYSIS from Financial Economists tomorrow (one of the definite highlights of the year for economists- consider it our Christmas, where the Markets get flighty, analysts tap away endlessly with nervous glee and journalists try to get their piece) and the actual budget tonight. Mr  Wayne Swann you have your work cut out for you! After 9/10 surpluses produced by Peter Costello (even though stronger conditions) and you promising somewhat irresponsibly a surplus within 2 years it will be interesting to see your report tonight. After all, this is the time to get tough early in your re-elected term as we all know next year it will be too close to the next election and polling for you to make any STRONG decisions